Russia in Aleppo – cont.

Russia’s strategy of oscillating between escalation and de-escalation seems to be paying off. As soon as EU sanctions in response to the Aleppo bombings were raised, Russia announced a “humanitarian pause”. Coincidentally, that pause was on the very same day that the EU’s Heads of State and Government were going to discuss the issue. Even before that announcement support for more EU sanctions against Russia was rather weak. Moscow’s tactical play further emboldened the naysayers and undermined the pro-sanctions camp. Now the issue seems off the table again, Russia can go back to bombing.

Its aircraft carrier Admiral Kuznetsov is off to the Eastern Mediterranean to join operations in Syria. Spain was even going to allow the warship to refuel in one of its ports – provide it with oil so it may participate in the destruction of Aleppo. Only after an intervention by NATO’s Secretary General and others, did the Spaniards back down and have Russia withdraw its request for refuelling.

Meanwhile, the media cycle has moved on. Aleppo is no longer the story of the day; the Western offensive in Mosul is. Putin must be laughing to himself how he played this. He put the West off guard, sowed division and in the process even undermined Western sanctions policy. When Merkel intervened and invited him to Berlin for talks, Putin brought along with him Vladislav Surkov, who is on the EU sanctions list and banned from entering the EU (he was given an “exception” by the German Foreign Ministry in order to attend). And the day before his arrival, Putin mentioned at the BRICS Summit that Western sanctions can go “screw themselves”.

How much more time and escalation in Syria will it take before consequential action, such as additional sanctions, will be back on the front burner? Now is not the time to weaken resolve. Weakness and indecision embolden Moscow. It’s time for grit and backbone. You can’t “euro-fudge” the Kremlin.

It means making sure that Russia is not re-elected on the Human Rights Council this coming Friday at the UN General Assembly. It means already drafting sanctions proposals. It means not continuing business-as-usual, for example with Spain simply providing fuel to Russian warships. It means ratcheting up the pressure on Gazprom. The gas giant has raised the spectre of abandoning its Nord Stream 2 pipeline at a board meeting on 9 November. Well, let’s help them decide!

Bombs, Bullets and Bytes: Putin’s challenge

Aleppo is rubble. Men, women and children are torn apart limb by limb as bombs are dropped by Assad’s and Putin’s planes. Is that what it took for the West to come to the brutal realisation that it can’t manage Russia in Syria? Cynically speaking, the West lost Syria a while ago. Ever since President Obama drew that meaningless red line against chemical weapons, Putin knew Syria was his for the taking. Talks of cooperating with Russia in Syria and building an anti-ISIS alliance might have been genuine but they were self-deceiving. It was an attempt to use an enemy (ISIS) that unites us. But the proverb “the enemy of my enemy is my friend” ain’t enough. It cannot gloss over the divergence of core interests in Syria between Russia and the West.

The outrage of the international community now calls for action. Indiscriminate bombing of civilians cannot be left unanswered. But – woefully – there aren’t many potent options available in Syria it seems. Establish a no-fly zone? How would that work? Would the West really be prepared to shoot down Russian planes? Not a chance. There might have been a time when this option could have been feasible but its chances are gone. Provide Syrian rebels with anti-aircraft weaponry? These weapons might just end up in ISIS’ hands. Another set of sanctions against Russia? At first look a good idea. So far, however, there’s no united European front for this. The Russia-smitten Social-Democrats in Germany are against as are other EU Member States. The Conclusions of the EU Foreign Ministers of today (18 October 2016) don’t raise sanctions (that’s for the Heads of States and Governments to discuss this week) and they also show a reluctance to name Russia directly – instead it’s packed under the rubric of Syria and its “allies”. Sanctions imposed ideally also ought to be tied to demands. What would those be? Stop bombing Aleppo? They can easily do so when it’s fallen – would the sanctions then be lifted? Or bring those responsible to the International Criminal Court? Forget about it. Don’t get me wrong – sanctions would be symbolically important but it would be unclear how to proceed with them. Russia has the upper hand in Syria. It can escalate and de-escalate the situation as it sees fit. Just now it has said that it will have an 8-hour “humanitarian pause” on Thursday. This strategy of escalate/de-escalate allows the Kremlin to throw European decision-making off guard and tests internal Western cohesion.

So maybe the table of options needs to be widened to areas where we are strong and have influence. Merkel could – apart from floating sanctions – announce that Nord Stream 2 is a no-go. Germany could abandon its selfish rejection to join Central and Eastern European countries in an energy solidarity cluster. The EU’s anti-trust watchdog could weaken Gazprom’s pricing power in Eastern Europe. Murky Russian financial networks in the EU could be further examined and action considered, etc.

Simultaneously, the European Union also needs to dramatically step up its game when it comes to cyber-defence. Putin puts pressure externally and internally. He uses bombs in Syria, bullets in Ukraine and bytes in the West. Russia’s information warfare has entered a new level. Interfering in elections with cyber attacks against the Democratic National Committee and feeding information to Wikileaks, stoking up societal divisions in Europe via disinformation such as the German case of “Lisa”, and so on. Europe should prepare itself. Elections will take place in Germany and France in 2017 – besides promoting far-right parties via funding and other means, disinformation can play a role here too.

We have to strengthen our internal resilience and social cohesion. Vice-President Joe Biden came out saying that the US could engage in a reciprocal cyber attack by, for example, attaining and publishing information showing the hidden (corrupt) wealth of Putin. But again, this would be in an area where influence is limited. Putin squashes the domestic media – only few would dare put such stories out at the risk of their own life. We cannot play Putin’s game – we must play our own.

Walk it like you talk it: The Paris Climate Deal

After ducking and dodging, pausing and procrastinating, and finally stumbling and struggling, the European Union ratified the Paris climate agreement. This landmark accord will now enter into force on 4 November 2016. This is history in the making. In the past, climate conference after climate conference crushed hopes. With the momentous deal in Paris, the world community pledges to keep the increase in global average temperatures to well below 2ºC (aiming to limit it to 1.5ºC).

But now the real work begins. Emission-reduction promises need to be raised. Thus far, the ambition doesn’t add up. The currently submitted emission-reduction promises would still lead to a warming in excess of 3ºC – a catastrophic scenario. And that’s just the ambition on paper.  It’s time to move from words to deeds. That means investing in the transformation towards a low-carbon economy. Infrastructure is key here.

More than 60% of the world’s greenhouse gas emissions are associated with the current infrastructure stock. Meanwhile, Europe’s infrastructure is crumbling. Mobilising investments into sustainable, hi-tech infrastructure would kill two birds with one stone: make Europe’s infrastructure fit for the 21st century as well as climate-friendly. In addition, it would give a much needed economic boost. According to economist Lord Stern strong investment in sustainable infrastructure is “the growth story of the future”.

The current economic context is also favourable. We are living at a time of great technological development – it’s an opportunity to upgrade as well as build infrastructure with the latest technologies. Second, the low interest rate environment is a boon for such an investment drive. Germany, for example, is currently making money with its debt due to negative interest rates. It is irresponsible to not make use of this situation to renew Germany’s ailing infrastructure! Instead German Finance Minister Schäuble is dogmatically sticking to his austerity policies while floating short-sighted tax decreases.

Infrastructure investment is the talk of the town. The IMF and World Bank raised it in their annual meeting last week, both Hillary Clinton and Donald Trump have called for massive new infrastructure spending, the European Commission is going for it by doubling its Investment Plan, former President of Mexico, Felipe Calderón, has called for it with a major new report from the Global Commission on the Economy and Climate, and so on.

This investment drive into sustainable infrastructure needs to happen on two fronts. First, the EU and particularly those EU Member States who can (read: Germany) need to increase infrastructure investments. In spite of the European Investment Plan, the EU’s investment figures are still below pre-crisis levels. An intergovernmental investment fund – as proposed by the Jacques Delors Institute and the Bertelsmann Foundation – could for example also be established. In addition, it is important to note that only some EU Member States benefit from the low interest rate environment – other economies, most notably in Europe’s South are struggling with high rates. Mechanisms and facilities that would promote usage of low interest rates in the latter economies would be of great importance. In this context, the think tank Agora Energiewende has come up with the innovative proposal of an “EU Renewable Energy Cost Reduction Facility”. At the moment, the cost of capital for investments in renewables varies from country to country (for example, 10% in Spain, 12% in Greece, 6% in France, 4% in Germany). Such a programme would protect renewable energy operators from specific risks, which would reduce the cost of capital and thereby could, in their calculations, reduce the cost of expanding renewable energies by around €34 billion.

Second, private investments in sustainability need to be mobilised and the financial sector must be included in this task. A carrot and stick approach is required: financing climate solutions needs to be made easier and more attractive, while financing climate problems should be made more difficult. Many public actors are now realising the importance of making finance more sustainable by, for example, mandating climate risk disclosure standards for investments or defining clear criteria for green bonds. The G20 is working on it, the Financial Stability Board is working on it, as are China, the UK, France, and so on.

But the EU has been remarkably blind to these developments. Sustainability had been completely ignored in its Capital Markets Union. Only now the European Commission is waking up, aiming to establish a sustainable finance expert group that should develop a strategy. It’s unclear, however, whether this is a strategic shift or just a tactical delay. Is the European Commission really wanting to push the issue of sustainable finance? Or is it proposing an expert group to postpone taking action? If this committee is only established in 2017 and comes out with a strategy 2018, then it might be too late to draw any concrete legislative consequences this term, given that elections for a new European Parliament and Commission will come up in 2019. It reminds me of the saying by Charles Kettering: “If you want to kill any idea in the world, get a committee working on it.” Ingrid Holmes, Director of the E3G London Office, has come out with an excellent paper grading the progress made on sustainability in the Capital Markets Union, in this regard.

Simultaneously, investments in fossil fuel infrastructure need to be disincentivised. Such investments carry an economic risk as they are incompatible with a climate agenda and would therefore at some point or another lose their value. A whole range of actors starting with the Carbon Tracker Initiative and Bank of England to the ECB’s European Systemic Risk Board, have highlighted the risk of such a “carbon bubble”. End of this year, the European Commission will look at its Capital Requirements Regulation. This could, for example, be an occasion to discuss whether investors such as banks should hold particular capital buffers in place against the fossil fuel assets that they own – risk premiums for fossil fuel projects must be higher than for low carbon alternatives.

Last but not least, the global divestment movement has been incredibly successful in driving the climate agenda forward and getting institutions to divest from fossil fuels. So far over 50.000 individuals and 590 institutions, totalling $3.4 trillion in assets have divested from fossil fuels. This pressure must be kept up but simultaneously there should also be pressure on companies to switch to renewable energy sources themselves, thereby lifting demand for such renewable infrastructure. A bunch of initiatives, such as the Renewable Energy Buyers Alliance (REBA) or the RE100 are committing companies to go 100% renewable for their business operations. RE100, for example, so far includes 81 companies. Out of these, however, only three are from Germany (Commerzbank, BMW, SAP). Shouldn’t there be more companies in the land of the Energiewende that pledge to source all of their electricity needs from renewables? I could imagine, for example, that this might be worthy of a NGO campaign.

With the Paris deal, there’s now – on paper – a historic momentum on tackling climate change. This must now be galvanised into action by putting money where our mouths are and investing in the necessary climate infrastructure.

Geopolitical investments into Europe – What you gonna do when they come for you?

So far 2016 has seen a record of Chinese corporate dealmaking in Germany. These first six months alone €8 billion in mergers and acquisitions were announced – a sum bigger than all Chinese M&A in Germany over the last five years combined. Germany isn’t an isolated case. Chinese investment has grown all over Europe. Between 2010 and 2014 Chinese investments into the EU have increased ten-fold.

Interest in Europe’s corporate landscape is natural. Europe is home to a large market, leading R&D and top-notch companies. There’d be something seriously wrong if China wouldn’t want to invest in Europe. So this ain’t a bad thing.

But then again, Chinese investment is entering a different ball game. Gone are the days when China invested in low-value added economic segments such as natural resources and basic manufacturing. It’s now about high-value added companies ranging from software and robotics to waste management and advanced machinery – all technological areas highlighted as economic priorities in the 13th Five-Year-Plan and the Made in China 2025 industrial strategy. Second, in a majority of these deals the Chinese state looms large. Last year 70 per cent of all Chinese investment in Europe was undertaken by state-owned enterprises, who enjoy access to cheap Chinese capital to fund such takeovers. What we are seeing, according to Sebastian Heilmann, President of the Berlin-based Mercator Institute for China Studies, is “governmental-program capital working behind the scenes”. Chinese companies are – with the help of the state – buying some very promising European firms that would provide China with an economic competitive edge in the future. In addition, now that a lot of companies are digitalised and working with clouds, buying one company can provide important insights and data into other customer companies. Some cases, such as the recent buy-out of Aixtron, raise particular questions as the Chinese state seems to have been involved in first ensuring a massive crash of Aixtron shares, only then to be bought up by a Chinese company “on the cheap”.

This new trend is so far met by two particular tendencies in Europe’s political sphere: naivety and fear.

Naivety by those free trade liberals that believe a market should be entirely left to its own devices as well as those that believe “reciprocity” is the name of the game, meaning we should focus on European companies being able to invest as freely in China as vice-versa. Both, the European External Action Service and the EU Member States, have stressed this need for reciprocity in investment relations.

Then there’s the fear. Regrettably, too often reporting about rising Chinese investment is coming with an underlying sensationalist emotional undertone; fear mixed with an inherent racism (think ‘yellow peril’) that China is on a shopping spree, buying out and overrunning Europe.

Both are obviously wrong and say more about ourselves than others. Naivety places too much confidence in our free market. It ignores the geopolitical dimension. Too much blind faith is put in the belief that China would swing open the doors to its own economic market just because we ask and that’s what our markets are like. China doesn’t have an open market. China’s top rulers sitting in the Zhongnanhai complex have every tool at their disposal to intervene in the market at any time convenient. An opening for investment now, can easily be followed by a clampdown later. Their lever will always be bigger than ours. Contrarily, fear underscores a lack of confidence in Europe’s economic system and its political leadership. It doesn’t believe we’re up to the challenge of facing off politicised investments. Marilynne Robinson aptly described this in her essay “Decline” recalling the period of Japanese economic strength in the 1980s:

“Remember when Japan seemed bent on buying every stick and stone of this perishing republic? At least so far as our journalism was concerned. None of these things were the fault of the Japanese. They were simply the screen on which, for the moment, we projected our anxieties.”

Between these two sentiments, a clear-headed pragmatism needs to prevail, which places confidence in the market economy, builds resilience against political motives and takes national and European interests better into account when it comes to mergers and acquisitions by foreign-owned enterprises. Basically, we need better national security investment screening regimes.

At the moment, there is a lack of effectiveness and quite frankly confusion when it comes to foreign investments in Europe. Let’s remember the case of Kuka, a robotics company described as Germany’s crown jewels in its drive to automate and digitise manufacturing. Just this year Chancellor Merkel together with President Obama visited Kuka’s exhibition at the Hannover Industrial Fair, describing the company as the future of German industry. When it was announced that China’s Midea launched a takeover offer for Kuka, the German government’s response was silence. It took nearly a month for them to register the event. By then they were scrambling for an answer, in the end realising that their prescriptive national security regime governing investments didn’t give them any leeway in this merger anyway. Or consider the case in France when GE made an offer for Alstom back in 2014. Wanting to inhibit the offer but having no leverage from its own investment screening regime, France hurriedly passed the “Montebourg Decree”. This expanded the regime’s sectoral operations, requiring would-be foreign buyers to get permission from the Minister of Economy when investing in French energy, transport, water, health or telecoms companies. Before, the 2005 version of France’s investment security screening regime limited government intervention to M&A activity related to national defence.

Europe has a hodgepodge of different national security screening regimes for foreign investment (the think-tank MERICS has an excellent overview in this recommendable paper written by Thilo Hanemann and Mikko Huotari).

A two-pronged strategy is needed to strengthen the screening of foreign investments into Europe.

First, national security screening regimes need to be strengthened. Some EU Member States only look at the defence sector, others look at a number of sectors, and again others don’t have any screening regime at all. The European Commission should organise a conference bringing together national, European and US officials in this field in order to discuss these issues and share best-practice. Why include US officials? Because the US is the gold standard when it comes to screening foreign investments. It has ample experience through its Committee on Foreign Investment in the US (CFIUS).

This inter-agency committee can ask companies to modify the terms of their deal and advise the US President to shoot down a deal. Its mandate is broad enough to look at a very wide variety of investments and it commands such respect internationally that the mere notification that it is investigating a deal can suffice for companies to withdraw their offer. In 2012, for example, out of 114 notices of mergers and acquisitions, CFIUS investigated 45 cases. Out of these, a single one was blocked with executive power by President Obama while 22 cases were abandoned as the companies withdrew their merger plans after they knew they had CFIUS breathing down their necks. This agency actively looks for transactions of interests, particularly those that hadn’t been notified. I’m sure the German equivalent doesn’t necessarily do that. Most likely it only looks at the big cases that come to light due to media attention – as the case of Kuka highlights.

As such, there’s great room for improvement on the Member State level. Bringing national, EU and US officials together to exchange views and experiences, the European Commission could then publish a best-practice document with guidance that would allow EU Member States to consider updating their respective legislation.

Secondly, these national screening regimes should be supplanted by a supplementary European screening regime. The EU is too interconnected to consider foreign-based investments into a single national company through the national lens alone. European interests and solidarity must be taken into account. Two particular arguments come to mind.

Put simply, foreign investments into national companies have cross-border implications. Gazprom buying up strategic gas storage in Germany has implications for European, especially Polish, energy security. Or, hypothetical example, imagine a Chinese state-owned enterprise buying up a small Italian company, which has relevant subsidiaries in other Member States or which owns a piece of land near an important military facility somewhere else. That one deal that President Obama blocked in 2012 is a case in point. He denied Ralls Corporation, a firm owned by two Chinese nationals, from acquiring wind-farms in Oregon, because these renewables installations were all within range of restricted air space used for drone testing by the Naval Weapons Systems Training Facility.

Secondly, the EU Member States are strongest in cohesion through the EU. It might be difficult for a Member State like Malta, Lithuania or Hungary to block a massive Chinese, Russian or other great-power foreign-based investment, as there could be political consequences for preventing such a deal. But were the EU to block such a deal, the individual Member State wouldn’t be singled out for blame. Apple and Microsoft are two cases in point. It’s the EU that called out Microsoft’s anti-competitive behaviour and slapped Apple with a massive bill in back taxes, not individual Member States. This European dimension therefore has clear benefits to Member States and Commissioner Oettinger has already called for a European investment screening regime.

Therefore, the European Union could establish a CFIUS equivalent – a kind of Committee on Foreign Investment in the EU (CFIEU) which would bring together national officials and European officials from different policy fields to screen investments into Europe.

However, chances of a powerful, decision-making CFIEU being established seem pretty slim. It’s clear that the EU Member States wouldn’t accept a supranational authority that decides on foreign investments into their national corporate landscape.

In this context, it might be more realistic to start with a consultative body. For example, in the field of energy security, the EU has a European Gas Coordination Group that brings together national and EU experts on gas security and adopts opinions and reports. Perhaps there could be a kind of “European Foreign Investment Coordination Group”.

This group would look for transactions of interests, consider the political circumstances and investigate the European dimension of the deal. In the end it could adopt an opinion that would be made publicly available and that would have to be addressed at the national level. That way it could still influence national decision-making and put pressure on Member States. By highlighting possible ramifications of a deal for third-party Member States, it would also allow those to publicly comment and get engaged in the deal. This would to a certain degree Europeanise national processes.

Some of the recent merger cases should be a wake-up call to get active. Europe shouldn’t fear Chinese, Russian or any other investment but neither should it naively believe all these investments are pursued by a purely company logic. It should put in place security safeguards that make sure we separate the wheat from the chaff.

Did Juncker Rise to the Occasion? The State of the Union

There are speeches that give goosebumps, speeches that entertain, speeches that make one fall asleep, and then there are speeches that are so serious they leave an instant void; the audience needs time to digest and come to grips with it. This was the annual State of the Union speech (SOTEU) that Commission President Jean-Claude Juncker gave this Wednesday in the plenary of the European Parliament.

It didn’t get much applause from Members of the European Parliament. The German daily Sueddeutsche Zeitung was one of the first to title it a “disheartened speech” with no push. Others criticised the lack of vision and emotion. But this speech wasn’t, in the words of former President George H.W. Bush, about “the vision thing”. It wasn’t meant to be an emotional rallying cry for Europe. And it certainly wasn’t meant to be an ego-show by Juncker either. Those already took place before his speech. Both European Parliament President Martin Schulz and European Council President Donald Tusk, IMHO, engaged in one-upmanship. The day before the SOTEU Schulz launched a Facebook Live Debate with his own views on Europe (which garnered 1.4 million views) while Tusk did a press release with a five page letter he sent to the EU’s Heads of State and Government outlining his perspectives. That letter was conveniently sent in the evening of 13 September so that everybody would see it in their inbox the morning of Juncker’s speech.

No, to me, Juncker rose above this. His speeches are known to be off-script, natural and humorous. He likes to be a centre of attention. But this time was different. He stayed on script and exerted particular effort to stay completely in control, aiming to avoid attention to his particular person. This seemed to have thrown off guard many Members of the European Parliament.

His speech was intended to bridge divides, smoothen political atmospherics, and lay the ground for a successful European Summit in Bratislava that will take place later this week. Let’s not forget how many divisions have come to the fore between EU Member States and EU institutions over the last year alone. His speech meant to bring sides together again.

First, Juncker made appeals to different European political parties. He turned to Socialists by calling for a more social Europe, to Conservatives by highlighting the need for debt reduction, to Liberals by emphasising free trade, to Greens by demanding the EU’s speedy ratification of the Paris Climate Agreement.

Second, if there was an institutional power struggle between Member States and the European Commission, between more or less Europe, then Juncker took the wind out of those sails. He emphasised that “Europe can only be built with Member States and not against Member States” and that the EU “will and can never become a unitary state”.

Third, he made clear advances towards different regional splits (ie. North, South, East). This is particularly the case for Central and Eastern European Member States, which have had a particularly acrimonious relationship with the Commission. Poland was singled out as “a great nation”, the Postal Worker’s Directive, which is important to Central and Eastern European states, was given full support, and an olive branch was offered to their opposition to a fixed refugee relocation scheme with this paragraph: “When it comes to managing the refugee crisis, we have started to see solidarity. I am convinced much more solidarity is needed. But I also know that solidarity must be given voluntarily. It must come from the heart. It cannot be forced.” He also focused on the South. He highlighted Spain, Portugal and Cyprus and he took up the proposal of the Athens Declaration of the 1st Mediterranean EU Countries’ Summit, hosted by Greek Prime Minister Tsipras, to double the financing capacity of the Investment Plan. Simultaneously, he also mentioned the need for a Defence Union and took up proposals by France and Germany released in a paper this week to create a European Battle Group HQ, pool military spending and create a defence research fund.

Fourth, this SOTEU was also meant to provide ambitious new proposals that would deliver real benefits to its citizens. He proposed a fully deployed 5g network by 2025 and free WIFI access in all public places in Europe’s major cities by 2020, he pulled the initial proposal of roaming charges off the table in order to revise it with a text that would see all charges fully scrapped, he set out to create a European Solidarity Corps, in which young people across the EU will be able to volunteer their help, he moved forward plans for a EU Border and Coast Guard, called for a European Travel Information System to know who enters the EU when, promised to continue the fight against tax evasion emphasising the Apple case as an example, and so on and so forth.

And last but not least, I believe President Juncker is also trying to bring the EU and European discussions deeper into the Member States. In his SOTEU he called for more European debates in the national parliaments and said that all European Commissioners will go to their respective national assemblies to explain the European Commission’s policies, thinking, etc. This seems like a classical bear-hug strategy. At the moment, national capitals hijack the praise when Brussels does something good and they blame Brussels when something goes bad (especially when it’s their fault). But by encouraging more EU discussions in the national parliaments, and tying the European debates closer into the national debates, he might just manage to break this pattern. After all, it’ll be more difficult to lay blame at Brussels’ doorstep when issues have been adequately discussed at home and people are informed about the situation.

Did Juncker leave things out in his speech? Sure. He didn’t mention TTIP, the economic situation in Greece, the banking union and Italy’s banking crisis in the making, nor Russia, Ukraine and Turkey. Do a word frequency comparison of his 2015 and 2016 State of the Union speeches and the result will be a prevalence of “refugee”, “euro”, “Greece”, “crisis” (2015) compared to “work”, “invest”, “solidarity”, “people” (2016).

And will he be able to deliver on some of his proposals? That’s a mixed bag. A doubling of the European Investment Fund and scrapping Roaming charges, is very likely. But creating a European Solidarity Corps with 100.000 young volunteers by 2020? The idea is great but considering that the US Peace Corps has had 220.000 participants over the last 50 years, maybe his numbers are too far-fetched? Or maybe they aren’t given that 2013-2014 alone saw 272.000 Erasmus students, and this could be a major contingent to be tapped. Likewise, the proposal for free WIFI in public places in major cities by 2020, raised some eyebrows how that could be achieved.

But did he rise to the occasion? I believe he did. He intended to bring different constituencies together and create more unity, show that the EU can provide clear advantages to its citizens, and bring the European debate inside the national capitals. More work certainly lies ahead but Juncker is making sure that on the road to Bratislava the EU is not losing its way.


The Return of Europe’s Nation-States: A Response

This month’s edition of Foreign Affairs features a strongly anti-EU piece by Jakub Grygiel (“The return of Europe’s Nation-States: The Upside to the EU’s Crisis”), a Senior Fellow at the Center for European Policy Analysis. In his article, Grygiel argues that citizens are disillusioned with the European Union and that the EU has failed. He claims that a return to newly assertive nation states is necessary to master the continent’s pressing security challenges.

It’s easy to fall into the trap of believing that a return to the nation state is the answer to the problems the EU is facing. But there is no wall high or wide enough to insulate a country from the globalised challenges we are facing. As recently noted by former German Foreign Minister Joschka Fischer, “in the twenty-first century, the turn away from cooperation and integration amounts to burying one’s head in the sand and hoping the dangers will pass.” It was exactly a lack of coordination between national intelligence services that facilitated terrorist strikes, and it was many years of neglect and lacking solidarity that worsened the refugee crisis. Instead, EU Member States need to cooperate better.

Mr Grygiel, for example, believes that European nation states would do a better job on their own checking Russia, but how? Europe’s sanctions against Moscow would be the first victim of a return to nation states. China’s and Russia’s ‘divide and rule’ tactics would flourish in such an environment. Germany would happily continue to conduct bilateral energy deals with Gazprom, to the detriment of Central and Eastern Europe, without EU legislation binding its hands.

Furthermore, recalling Senator Moynihan, Mr Grygiel is of course entitled to his own opinion but not his own facts. Public opinion polls show support for the EU. According to Eurobarometer, citizens consistently trust EU institutions over their own national governments. After the historic Brexit vote, support for the EU actually increased in a number of Member States, particularly Germany. A recent annual survey of the World Economic Forum also highlighted that only 13% of European millennials identify primarily with their nation state, while over 50% see themselves as either global or European citizens.

What the European Union needs is neither ever more integration, nor a complete return to the nation state as supported by Mr Grygiel. Instead, flexibility is key, allowing for different types of deepening integration. EU Member States have an arsenal of integration models at their disposal. They can advance “enhanced cooperation” between groups of Member States or they can use Permanent Structured Cooperation under Article 46 of the Treaty of the EU, as is currently being debated with regards to creating a Defence Union. Options for different forms of integration exist and need to be used.

Quoting the American theologian Reinhold Niebuhr, Mr Grygiel argues that individual countries will provide the kind of safety that Brussels can’t. Well, let me return the favour with another Niebuhr quote: “Nothing we do, however virtuous, can be accomplished alone.”

Where does the EU go from here? The upcoming Bratislava Summit

It is clear that after the UK’s historic decision to leave the European Union, the EU could no longer dodge the question that’s been increasingly on everybody’s lips: What is to be done? The EU is facing its deepest crisis with doubts about its very purpose emerging through the cracks. The forces of disintegration are on the rise. What’s the turnaround strategy that will bring Europe forward and renew confidence in this unique project? What’s the post-Brexit European narrative?

Following the UK referendum, confusion and disarray reigned supreme. The Brexiteers had no plan in case of Brexit, but neither did the EU institutions. No concrete ideas on the way forward for the EU after such a result were presented. Mogherini’s Global Strategy came closest in charting some course. Instead, there was scaremongering, flip-flopping, and calls for Commission President Juncker’s resignation.

Only after the dust started to settle and shock gave way to sober analysis did action follow. Now European leaders will meet in Bratislava on 16 September to flesh out a plan for the future of Europe post-Brexit. In the meantime, an array of actors has come out with position papers, interviews and political lines in attempts to set the agenda. Some are new, some are old, and some is just old wine in new bottles. A confrontation is emerging on two fronts. First, on the governance of the European Union and second on which policy areas should be the ones where the EU drives forward, achieves results, regains relevance and wins back confidence from its citizens.

The former is an old debate regarding the balance of power between EU institutions and governance models. It’s about “more” or “less” Europe, pitting federalism against intergovernmentalism. The social-democratic camp came out early in this one. European Parliament President Martin Schulz and German Vice-Chancellor Sigmar Gabriel co-published a paper calling for more integration and a federal Europe with a bicameral European government. A rather unrealistic proposition given the current situation. Others used the opportunity to highlight the importance of a two-speed Europe where a core – such as for example the founding Member States or Eurozone – move forward with integration leaving others behind. And then there are the voices, particularly from Central and Eastern Europe, calling for a re-nationalisation of European policy. Polish President Beata Szydło, for example, sees “the need to strengthen national control over EU decision making processes” and the Marshal of the Polish Sejm stated in a declaration that “the coexistence and cooperation in Europe should be based on sovereignty of nation states”.

German Finance Minister Schäuble also weighed in to this debate, declaring that if the European Commission can’t get things done the Member States will take matters into their own hands. Laying blame for lacking progress on the European Commission’s doorstep, however, is hypocritical. It’s the EU Member States in the European Council themselves that most often cannot come to an agreement and thereby halt progress! Schäuble is disingenuous when he refers to the Eurozone crisis or the Turkey deal as examples of intergovernmentalism where the Member States took charge, solving problems. It wasn’t the Member States; it was Germany. It was a domineering Berlin that forced its deals onto others. This is what led to divisions and bad blood amongst the Member States.

In such a crisis where the core of the European project is in doubt, the Member States should especially show solidarity and walk together in lockstep. But this is not happening. Instead, Member States are descending into bloc politics. After Brexit, German Foreign Minister Steinmeier invited only Foreign Ministers of EU founding members for consultation to Berlin, snubbing the rest. The Central and Eastern European bloc is coordinating its position for the Bratislava Summit with the Visegrad Group of Poland, Hungary, Czech Republic and Slovakia planning to publish a joint contribution beforehand. And the southern axis is coming together too: Greek Prime Minister Tsipras has invited his counterparts from France, Italy, Spain, Portugal, Cyprus and Malta to a summit in Athens on 9 September. Meanwhile, the three largest voting members in the European Council – Germany, France and Italy – have met at Ventotene on 22 August to discuss Bratislava.

Of course coordination before this important Bratislava Summit is necessary. But the question to me is rather, which format is more likely to unite rather than divide, on the road towards Bratislava? A strategic centre of Member States is needed that is small enough for conducive debate but representative enough to cover all Member States. Teaming up with Presidents Renzi and Hollande, Chancellor Merkel has tried to form such a centre between Germany, France and Italy. But this constellation is woefully lacking Central and Eastern Europe, forcing Merkel on a whirlwind tour of meetings with Member States (14 Member States in one week). Forming a Quartet together with Poland, which holds the current Presidency of the Visegrad Group, would have ensured that this region is also represented. It could have brought EU Member States better together before Bratislava. To quote Lyndon B. Johnson: “It’s probably better to have them inside the tent pissing out, than outside the tent pissing in”.

And Member States are coming together in bloc politics to push forward the policy issues important to them, which brings me to the second front I highlighted earlier. The South is rallying to achieve progress on economic growth, investment, fighting austerity while Central and Eastern Europe is focusing on the refugee issue, reinforcing borders and strengthening national sovereignty.

The Ventotene meeting on 22 August between Merkel, Renzi and Hollande showcased the splits and highlighted some of the issues that could come into play in Bratislava. Issues raised were external/internal security, youth, refugees and economic growth/investment. Little was reached on the last two while on youth it was agreed to expand the Erasmus student exchange programme also to apprenticeships. Only the issue of external/internal security had broad agreement. Generally, this much anticipated meeting was hyped up beyond proportion. After all the three weren’t going to announce some ambitious proposals ahead of the Bratislava Summit, as this would have simply strained ties with the other 24 Member States. As such, Ventotene was largely symbolic with the three laying flowers at the tomb of Altiero Spinelli, who wrote the Ventotene Manifesto calling for a federation of European states to prevent nationalism from sparking war. The meeting seemed to be very much geared towards domestic consumption, intended to bolster support for Renzi who will be facing his own referendum on constitutional reform this October.

In the context of Ventotene, it seems that the most likely progress at the Bratislava Summit will be a declaration to move forward in the area of security and defence. An agreement in this area seems clear as I highlighted in an earlier blog post. Mogherini’s Global Strategy laid groundwork for this, the French and German Foreign Ministers also called for more integration on security and defence, as did the Italian Foreign and Defence Ministers in an op-ed in Le Monde, and Central and Eastern European Member States would also be in favour with Czech Prime Minister Bohuslav Sobotka having recently declared that he hopes the Bratislava Summit will bring progress on a joint military. In addition, Russian military aggression in Ukraine has also made the Nordic countries more willing to co-operate on defence issues, with Sweden and Finland raising security through defence collaboration agreements with the United States.

Pushing the EU forward in the nexus external-internal security is important. It’s an area where the EU can and must deliver. It should show that the EU provides security to Member States and its citizens, an elementary requirement given that in the context of a world in flames ranging from Libya and Syria to Ukraine and homegrown terrorism, ever more people ask whether the Union can provide security.

But I fear that this won’t be enough. Discontent with the EU isn’t merely based on fears about ISIS or geopolitics. It’s also about globalisation, feelings of being left behind, economic insecurity and social inequality – it’s about pocketbook issues. Here the EU needs to provide answers, too, lest it find itself portrayed as the cause of such malaise. This means boosting investments, strengthening the social pillar of the EU, making progress on fighting tax evasion, and tackling youth unemployment. Especially the last is crucial. Youth still feels great affection for the EU as evidenced in the UK referendum, but the EU is at risk of losing its youth if they don’t see any future prospects or have a stake in the EU. An open letter signed by prominent societal actors and politicians rightly made this point recently in Die Welt calling for a strengthening of the European Youth Guarantee, a revision of Erasmus to an Erasmus for all, and developing a common school curriculum on European culture.

On the road towards Bratislava, progress is on the horizon. But more is needed. As it stands, it is doubtful, whether the EU Member States will be able to overcome their divisions. This will make the next half year especially tough with further challenges ahead: a possible renewed refugee influx as Syria’s bloodbath continues, winter is approaching and the Turkey refugee deal hangs in the balance, a presidential vote in Austria between a far-right politician and a Green, a referendum in Italy, a volatile Ukraine, and so on.